JPMorgan International Equity C JIECX

Strength in JPMorgan International Equity C's Process Pillaris partially offset by an Average People Pillar rating, leading to a Morningstar Quantitative Rating of Neutral. Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the most expensive quintile among peers.

The strategy benefits from the longest-tenured manager on the team's lengthy experience. This is a positive driver of the strategy's Average People Pillar rating. The strategy's sensible investment philosophy earns an Above Average Process Pillar rating. The portfolio has overweighted quality exposure and has an underweight in yield exposure compared with category peers. A high quality exposure means holding stocks that are consistently profitable, growing, and have solid balance sheets. And a low yield exposure is rooted in holding fewer stocks with high dividend or buyback yields -- instead, typically holding stocks in an early stage of development. The strategy is part of a first-rate parent, as shown by a high lineup success ratio and overall low fees. These attributes support its Above Average Parent Pillar rating.

Morningstar's evaluation of this fund's process aims to determine whether it has been applied consistently over time, as demonstrated by the portfolio's composition, its suitability for different types of investors, and expectations for performance in different market conditions, assuming the process is adhered to. JPMorgan International Equity Fund earns an Above Average Process Pillar rating.

This strategy skews toward larger, growthier companies than its average peer in the Foreign Large Blend Morningstar Category. Looking at additional factor exposure, this strategy has a defensive tilt owing to its exposure to high-quality stocks. This means the fund holds consistently profitable, growing companies with solid balance sheets that may help it endure downturns better than Morningstar Category peers. The strategy is also historically more exposed compared with Morningstar Category peers. The managers have not exhibited a preference for or aversion to yield; the current portfolio has about average exposure. High-yield stocks tend to be more mature and less volatile, unless they cut their dividends. But when compared with category peers, the strategy historically has had less exposure. Additionally, the managers do not tilt in favor of or against bearing liquidity risk, the current portfolio bears about average exposure compared with other equity strategies. Although there is some evidence to indicate investors earn a premium for shouldering this risk, in the case of a bear market, less-liquid assets are more difficult to sell without adversely affecting prices. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section.

The portfolio is overweight in financial services by 3.3 percentage points in terms of assets compared with the average portfolio in the category, and its energy allocation is similar to the category. The sectors with low exposure compared to their category peers are consumer cyclical and real estate, with consumer cyclical underweighting the average portfolio by 3.4 percentage points of assets and real estate similar to the average. The strategy owns 76 securities and is relatively top-heavy. Of the strategy's assets, 28.7% are concentrated within the top 10 holdings, as opposed to the category’s 14.7% average. And in closing, in terms of portfolio turnover, this fund trades less frequently than the category’s average, potentially limiting costs to investors.

The team at JPMorgan International Equity Fund has benefited from its longest-tenured manager and minimal team turnover, but it still does not stand out as one of the industry's best, warranting an Average People Pillar rating. Thomas Murray, the longest-tenured manager on the strategy, boasts over 25 years of portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.7 stars, demonstrating disappointing risk-adjusted performance. The team boasts an experienced corps of listed portfolio managers, with three others supporting Thomas Murray. Together they average 21 years of portfolio management experience. As a team, they manage two investment vehicles together, with a Bronze asset-weighted average combined Morningstar Analyst and Quantitative Rating, demonstrating their potential to deliver positive alpha in aggregate. The management team has provided the fund with commendable continuity. There have been no documented departures within the past three years.

A well-resourced, thoughtful, and disciplined steward of client assets, JPMorgan Asset Management maintains an Above Average Parent rating.

As of 2022, this investment stalwart manages more than USD 2.5 trillion in AUM. Composed of various cohorts globally and a diverse set of asset classes, the firm has more tightly integrated its capabilities in recent years, notably through the development of proprietary analytical and risk systems. Investment teams are robustly staffed and helmed by seasoned contributors. The firm’s strategies tend to produce reliable portfolios, and several flagship offerings are Morningstar Medalists. Manager incentives align with fundholders'; compensation reflects longer-term performance factors, and portfolio managers invest in the firm’s strategies as part of their compensation plans.

The firm’s funds tend to be well-priced, but they aren’t as competitive as many highly regarded peers of similar scale. Recent product launches include thematic and single-country strategies, both of which carry the potential for volatile performance and flows, along with misuse by investors. The firm remains intrepid when it comes to developing an environmental, social, and governance-focused framework and continues to move into other areas such as direct indexing through its 55iP acquisition and China through its joint venture, but these complicated initiatives take time to assess any real and lasting effect.

This strategy’s C share class has held up poorly, falling behind both its peers and the category benchmark. Specifically, over the past 10-year period, this share class trailed its category's average return by an annualized 74 basis points. It was also not able to outpace the category benchmark, MSCI ACWI ex USA Index, where it trailed by an annualized 63 basis points over the same period.

Even when adjusting for risk, the fund is not favorable. The share class had a lower Sharpe ratio, a measure of risk-adjusted returns, than the index over the trailing 10-year period. But notably, these subpar risk-adjusted results have not come with a rockier ride for investors. This strategy took on similar risk as the benchmark, as measured by standard deviation. Finally, the share class proved itself ineffective as it was unable to generate alpha, over the same 10-year period, against the category group index: a benchmark that encapsulates the performance of the broader asset class.

It is critical to evaluate expenses, as they are subtracted directly out of returns. This share class is within the costliest quintile of its Morningstar Category. Its unattractive fee, taken together with the fund’s People, Process, and Parent Pillars, results in a judgment that this share class does not offer investors a good chance to capture positive alpha compared with its category benchmark, leading to its Morningstar Quantitative Rating of Neutral.